GAITHERSBURG, MD — (Marketwire) –11/05/12 –BroadSoft, Inc. (NASDAQ:BSFT, news, filings), the leading global provider of Internet protocol-based, or IP-based, communications services to the telecommunications industry, today announced financial results for the quarter endedSeptember 30, 2012.
Financial Highlights for the Third Quarter of 2012
- Total revenue increased 13% year-over-year to $40.2 million
- GAAP gross profit equaled 81% of total revenue; non-GAAP gross profit equaled 84% of total revenue
- GAAP income from operations totaled $6.5 million or 16% of revenue; non-GAAP income from operations totaled $10.5 million or 26% of revenue
- GAAP diluted EPS equaled $0.11 per common share; non-GAAP diluted EPS equaled $0.35 per common share
Results for the three months ended September 30, 2012
Total revenue rose to$40.2 millionin the third quarter of 2012, an increase of 13% compared to$35.7 millionin the third quarter of 2011.
Net income for the third quarter of 2012 was$3.1 million, or$0.11per diluted common share, compared to net income of$7.3 million, or$0.26per diluted common share in the third quarter of 2011.
On a non-GAAP basis, net income in the third quarter of 2012 was$10.0 million, or$0.35per diluted common share, compared to non-GAAP net income of$10.7 million, or$0.38per diluted common share, in the third quarter of 2011. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.
Results for the nine months ended September 30, 2012
Total revenue was$119.0 millionfor the first nine months of 2012, compared to$97.5 millionfor the first nine months of 2011, reflecting year-over-year growth of 22%.
Net income for the first nine months of 2012 was$7.2 million, or$0.25per diluted common share, compared to net income of$26.8 million, or$0.96per diluted common share, for the first nine months of 2011. Results for the nine months endedSeptember 30, 2011included an income tax benefit of$9.9 million, or$0.36per diluted common share, resulting from the release of a tax valuation allowance relating to net deferred tax assets.
On a non-GAAP basis, net income for the first nine months of 2012 was$27.5 millionor$0.97per diluted common share, compared to non-GAAP net income of$23.7 million, or$0.85per diluted common share, in the first nine months of 2011. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.
Management Commentary
“We remain laser-focused on executing against our strategic initiatives, which helped us deliver solid third quarter results and positions us for further growth with our customers. We continue to be excited by the growth of our addressable market as we help our customers extend their hosted voice services into a comprehensive Unified Communications offer,” saidMichael Tessler, president and chief executive officer,BroadSoft. “We further solidified our innovation leadership and strategic partner position with many of our customers two weeks ago at our annual executive users’ conference, BroadSoft Connections. At the event, we announced extensive new capabilities designed to address the needs of varied market segments, from mobile integration for small businesses to vertical application integration for large enterprises. These innovative enhancements were very positively received and led to strategic discussions on how we could best help our customers accelerate the adoption of their Unified Communications services.”
“Revenue grew 13% year-over-year in the third quarter and 22% on a year-to-date basis. Billings, which we define as revenue plus the quarterly change in total deferred revenue, grew 45% year-over-year in the third quarter and 31% on a year-to-date basis,” saidJim Tholen, chief financial officer,BroadSoft. “In addition, we also delivered strong profitability, with non-GAAP gross margin of 84% and non-GAAP operating margin of 26%. Operating cash flow was$9.7 millionduring the quarter.”
Guidance
For the fourth quarter of 2012,BroadSoftanticipates revenue of$43 to $48 millioninclusive of approximately$0.8 millionin revenue from the recent Adaption asset acquisition. The Company also expects to achieve earnings on a non-GAAP basis of$0.33 to $0.48per diluted common share which includes expected dilution from the Adaption acquisition of approximately$0.02per share.
For the full year 2012,BroadSoftexpects revenue of$162 to $167 million, which includes approximately$1.4 millionin contribution from the Adaption acquisition. The Company anticipates full year 2012 earnings on a non-GAAP basis of$1.30 to $1.45per diluted common share, which includes expected dilution of approximately$0.04per share for the Adaption acquisition.
Conference Call
BroadSoftwill discuss its third quarter results and business outlook today via teleconference at 5:00 p.m. Eastern Time. To participate in the teleconference, callers can dial the toll free number 1-877-312-5517 (U.S. callers only) or 1-760-666-3772 (from outside the U.S.). The conference call can also be heard live via audio webcast at http://investors.broadsoft.com/events.cfm. To help ensure the conference begins on time, please dial in or connect via the web five minutes prior to the scheduled start time.
For those unable to participate in the live call, a recording will be available shortly after the conclusion of the call at http://investors.broadsoft.com/events.cfm and will remain available until immediately prior to our next earnings call.
BroadSofthas provided in this release, and will provide on this afternoon’s teleconference, financial information that has not been prepared in accordance with generally accepted accounting principles, or GAAP.BroadSoftuses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluatingBroadSoft’songoing operational performance.BroadSoft’smanagement regularly uses these non-GAAP financial measures to understand and manage its business and believes these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s performance by excluding certain non-cash expenses, and may include additional adjustments for items that are infrequent in nature.BroadSoftbelieves the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial results with other companies inBroadSoft’sindustry, many of which present similar non-GAAP financial measures to investors. A reconciliation of the non-GAAP financial measures included in this release and to be discussed on this afternoon’s teleconference to the most directly comparable GAAP financial measures is set forth below.
Non-GAAP financial measures:
Non-GAAP net income and net income per share.BroadSoftdefines non-GAAP net income as net income plus stock-based compensation expense, amortization expense for acquired intangible assets, non-cash interest expense on the Company’s convertible notes, and non-cash tax expense included in the GAAP tax provision.BroadSoftdefines non-GAAP income per share as non-GAAP net income divided by the weighted average shares outstanding.BroadSoftconsiders these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of certain non-cash expenses so management and investors can compareBroadSoft’score business operating results over multiple periods.
Non-GAAP gross margin, license gross margin and maintenance and services gross margin.BroadSoftdefines non-GAAP gross margin as gross margin plus stock-based compensation expense and amortization expense for acquired intangible assets.BroadSoftconsiders non-GAAP gross margin to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so management and its investors can compareBroadSoft’ssales margins over multiple periods. WhereBroadSoftprovides further breakdown of non-GAAP gross margin between license and maintenance services, the Company adds back the stock-based compensation expense and amortization expense, as applicable, to the related gross margin.
Non-GAAP income from operations.BroadSoftdefines non-GAAP income from operations as income from operations plus stock-based compensation expense and amortization expense for acquired intangible assets.BroadSoftconsiders non-GAAP income from operations to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so management and investors can compareBroadSoft’score business operating results over multiple periods. WhereBroadSoftprovides further breakdown of non-GAAP operating expenses for sales and marketing, research and development and general and administrative, the Company deducts stock-based compensation expense included in the applicable expense item.
Billings.BroadSoftdefines billings as revenue plus the net change in our deferred revenue balance for a particular period.BroadSoftbelieves that billings is a key measure of our business activity.
With respect to our expectations under “Guidance” above, reconciliation of non-GAAP earnings per share guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures, in particular, the measures and effects of non-cash income taxes, which are extremely difficult to project as a result of our tax status in a number of foreign jurisdictions, and stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.
The presentation of non-GAAP net income, non-GAAP net income per share, non-GAAP gross margin, non-GAAP income from operations, billings and other non-GAAP financial measures in this release and on this afternoon’s teleconference is not meant to be a substitute for “net income,” “net income per share,” “gross margin,” “income from operations” or other financial measures presented in accordance with GAAP, but rather should be evaluated in conjunction with such data.BroadSoft’sdefinition of “non-GAAP net income,” “non-GAAP net income per share,” “non-GAAP gross margin,” “non-GAAP income from operations,” “billings” and other non-GAAP financial measures may differ from similarly titled non-GAAP measures used by other companies and may differ from period to period. In reporting non-GAAP measures in the future, management may make other adjustments for expenses and gains it does not consider reflective of core operating performance in a particular period and may modify “non-GAAP net income,” “non-GAAP net income per share,” “non-GAAP gross margin,” “non-GAAP income from operations,” “billings” and such other non-GAAP measures by excluding these expenses and gains.
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by their use of terms and phrases such as “anticipate,” “enable,” “expect,” “will,” “believe,” “continue” and other similar terms and phrases, and such forward-looking statements include, but are not limited to, the statements regarding the Company’s future financial performance set forth under the heading “Guidance.” The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to: the Company’s dependence on the success of BroadWorks® and on its service provider customers to sell services using its applications; claims that the Company infringes the intellectual property rights of others; the Company’s dependence in large part on service providers’ continued deployment of, and investment in, their IP-based networks; the Company’s ability to integrate and achieve the expected benefits from its recent acquisitions, including Adaption Technologies; and the Company’s ability to expand its product offerings, as well as those factors contained in the “Risk Factors” sections of the Company’s Form 10-Q for the quarter endedJune 30, 2012filed with theSecurities and Exchange Commission, orSEC, onAugust 6, 2012and the Company’s Form 10-K for the year endedDecember 31, 2011filed with theSEConFebruary 29, 2012, and in the Company’s other filings with theSEC. All information in this release is as ofNovember 5, 2012. Except as required by law, the Company undertakes no obligation to update publicly any forward-looking statement made herein for any reason to conform the statement to actual results or changes in the Company’s expectations.
About BroadSoft
BroadSoftis the leading provider of software and services that enable mobile, fixed-line and cable service providers to offer Unified Communications over their Internet Protocol networks. The Company’s core communications platform enables the delivery of a range of enterprise and consumer calling, messaging and collaboration communication services, including private branch exchanges, video calling, text messaging and converged mobile and fixed-line services.
Financial Statements
The financial statements set forth below are not the complete set of the Company’s financial statements for the quarter and are presented below without footnotes. Readers are encouraged to obtain and carefully review BroadSoft’sQuarterly Report on Form 10-Q for the quarter ended September 30, 2012, including all financial statements contained therein and the footnotes thereto, when it is filed with the SEC. Once filed with the SEC, the Form 10-Q may be retrieved from the SEC’swebsite at www.sec.gov or from BroadSoft’s website at www.broadsoft.com.
BroadSoft, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
September 30, December 31,
2012 2011
------------- -------------
(In thousands, except share
and per share data)
Assets:
Current assets:
Cash and cash equivalents $ 92,209 $ 94,072
Short-term investments 85,347 92,749
Accounts receivable, net of allowance for
doubtful accounts of $401 and $54 at
September 30, 2012 and December 31, 2011,
respectively 41,554 47,048
Deferred tax assets 9,487 12,968
Other current assets 7,541 4,435
------------- -------------
Total current assets 236,138 251,272
------------- -------------
Long-term assets:
Property and equipment, net 5,014 4,221
Long-term investments 5,001 5,000
Restricted cash 584 959
Intangible assets, net 12,023 8,842
Goodwill 37,280 17,276
Other long-term assets 12,170 3,386
------------- -------------
Total long-term assets 72,072 39,684
------------- -------------
Total assets $ 308,210 $ 290,956
============= =============
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable and accrued expenses $ 13,473 $ 14,999
Notes payable and bank loans, current
portion 486 891
Deferred revenue, current portion 41,872 55,372
------------- -------------
Total current liabilities 55,831 71,262
Convertible senior notes 85,233 81,737
Notes payable and bank loans 458 461
Deferred revenue 12,169 1,764
Deferred tax liabilities 2,301 1,433
Other long-term liabilities 1,133 1,056
------------- -------------
Total liabilities 157,125 157,713
------------- -------------
Stockholders' equity:
Common stock, par value $0.01 per share;
100,000,000 shares authorized at September
30, 2012 and December 31, 2011; 27,811,304
and 27,106,393 shares issued and outstanding
at September 30, 2012 and December 31, 2011,
respectively 278 271
Additional paid-in capital 202,776 191,714
Accumulated other comprehensive loss (2,981) (2,557)
Accumulated deficit (48,988) (56,185)
------------- -------------
Total stockholders' equity 151,085 133,243
------------- -------------
Total liabilities and stockholders' equity $ 308,210 $ 290,956
============= =============
BroadSoft, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2012 2011 2012 2011
--------- --------- --------- ---------
(In thousands, except per share data)
Revenue:
Licenses $ 21,554 $ 17,414 $ 65,320 $ 51,807
Maintenance and services 18,620 18,266 53,713 45,706
--------- --------- --------- ---------
Total revenue 40,174 35,680 119,033 97,513
Cost of revenue:
Licenses 1,878 1,275 6,453 3,896
Maintenance and services 5,117 4,568 15,819 13,518
Amortization of intangibles 730 236 1,846 726
--------- --------- --------- ---------
Total cost of revenue 7,725 6,079 24,118 18,140
--------- --------- --------- ---------
Gross profit 32,449 29,601 94,915 79,373
Operating expenses:
Sales and marketing 11,396 8,581 34,076 26,142
Research and development 8,876 6,587 26,483 20,133
General and administrative 5,701 5,269 17,395 14,151
--------- --------- --------- ---------
Total operating expenses 25,973 20,437 77,954 60,426
--------- --------- --------- ---------
Income from operations 6,476 9,164 16,961 18,947
Other expense, net: 1,627 1,543 4,809 1,714
--------- --------- --------- ---------
Income before income taxes 4,849 7,621 12,152 17,233
Provision for (benefit from)
income taxes 1,709 276 4,955 (9,598)
--------- --------- --------- ---------
Net income $ 3,140 $ 7,345 $ 7,197 $ 26,831
========= ========= ========= =========
Net income per common share
available to BroadSoft, Inc.
common stockholders:
Basic $ 0.11 $ 0.27 $ 0.26 $ 1.01
Diluted $ 0.11 $ 0.26 $ 0.25 $ 0.96
Weighted average common shares
outstanding:
Basic 27,673 26,953 27,487 26,447
Diluted 28,385 27,935 28,293 27,839
Stock-based compensation expense
included above:
Cost of revenue $ 385 $ 287 $ 1,276 $ 564
Sales and marketing 1,317 466 3,845 1,215
Research and development 1,040 506 2,940 1,263
General and administrative 584 631 2,237 1,851
Summary of Consolidated Cash Flow Activity
(Unaudited)
Nine Months Ended
September 30,
---------------------
2012 2011
---------- ----------
(in thousands)
Net cash provided by operating activities 17,928 21,887
Net cash used in investing activities (19,778) (100,869)
Net cash (used in) provided by financing activities (142) 117,614
BroadSoft, Inc.
Billings
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2012 2011 2012 2011
--------- -------- -------- --------
Beginning of period deferred revenue
balance $ 48,794 $ 54,379 $ 57,136 $ 59,264
End of period deferred revenue
balance 54,041 50,004 54,041 50,004
--------- -------- -------- --------
Increase (decrease) in deferred
revenue 5,247 (4,375) (3,095) (9,260)
Revenue 40,174 35,680 119,033 97,513
--------- -------- -------- --------
Revenue plus net change in deferred
revenue 45,421 31,305 115,938 88,253
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
Three
Three Months Ended Months Nine Months Ended
September 30, Ended September 30,
June 30,
2012 2011 2012 2012 2011
-------- -------- --------- -------- --------
(In thousands)
Non-GAAP gross profit:
GAAP gross profit $ 32,449 $ 29,601 $ 32,195 $ 94,915 $ 79,373
(percent of total
revenue) 81% 83% 79% 80% 81%
Plus:
Stock-based
compensation expense 385 287 483 1,276 564
Amortization of
acquired intangible
assets 730 236 557 1,846 726
-------- -------- --------- -------- --------
Non-GAAP gross profit $ 33,564 $ 30,124 $ 33,235 $ 98,037 $ 80,663
======== ======== ========= ======== ========
(percent of total
revenue) 84% 84% 82% 82% 83%
GAAP license gross profit $ 18,946 $ 15,903 $ 19,429 $ 57,021 $ 47,185
(percent of related
revenue) 88% 91% 86% 87% 91%
Plus:
Stock-based
compensation expense 113 110 174 428 203
Amortization of
acquired intangible
assets 730 236 557 1,846 726
Non-GAAP license gross
profit $ 19,789 $ 16,249 $ 20,160 $ 59,295 $ 48,114
======== ======== ========= ======== ========
(percent of related
revenue) 92% 93% 90% 91% 93%
GAAP maintenance and
services gross profit $ 13,503 $ 13,698 $ 12,766 $ 37,894 $ 32,188
(percent of related
revenue) 73% 75% 71% 71% 70%
Plus:
Stock-based
compensation expense 272 177 309 848 361
Non-GAAP maintenance and
services gross profit $ 13,775 $ 13,875 $ 13,075 $ 38,742 $ 32,549
======== ======== ========= ======== ========
(percent of related
revenue) 74% 76% 73% 72% 71%
BroadSoft, Inc.
Reconciliation of Non-GAAP Financial Measures (continued)
(Unaudited)
Three
Three Months Ended Months Nine Months Ended
September 30, Ended September 30,
June 30,
2012 2011 2012 2012 2011
-------- -------- --------- -------- --------
(In thousands)
Non-GAAP income from
operations:
GAAP income from
operations $ 6,476 $ 9,164 $ 5,576 $ 16,961 $ 18,947
(percent of total
revenue) 16% 26% 14% 14% 19%
Plus:
Stock-based compensation
expense 3,326 1,890 3,781 10,298 4,893
Amortization of acquired
intangible assets 730 236 557 1,846 726
-------- -------- --------- -------- --------
Non-GAAP income from
operations $ 10,532 $ 11,290 $ 9,914 $ 29,105 $ 24,566
======== ======== ========= ======== ========
(percent of total
revenue) 26% 32% 24% 24% 25%
GAAP operating expense $ 25,973 $ 20,437 $ 26,619 $ 77,954 $ 60,426
Less:
Stock-based compensation
expense 2,941 1,603 3,298 9,022 4,329
-------- -------- --------- -------- --------
Non-GAAP operating
expense $ 23,032 $ 18,834 $ 23,321 $ 68,932 $ 56,097
======== ======== ========= ======== ========
(as percent of total
revenue) 57% 53% 58% 58% 58%
GAAP sales and marketing
expense $ 11,396 $ 8,581 $ 11,608 $ 34,076 $ 26,142
Less:
Stock-based compensation
expense 1,317 466 1,391 3,845 1,215
-------- -------- --------- -------- --------
Non-GAAP sales and
marketing expense $ 10,079 $ 8,115 $ 10,217 $ 30,231 $ 24,927
======== ======== ========= ======== ========
(as percent of total
revenue) 25% 23% 25% 25% 26%
GAAP research and
development expense $ 8,876 $ 6,587 $ 9,131 $ 26,483 $ 20,133
Less:
Stock-based
compensation expense 1,040 506 1,101 2,940 1,263
-------- -------- --------- -------- --------
Non-GAAP research and
development expense $ 7,836 $ 6,081 $ 8,030 $ 23,543 $ 18,870
======== ======== ========= ======== ========
(as percent of total
revenue) 20% 17% 20% 20% 19%
GAAP general and
administrative expense $ 5,701 $ 5,269 $ 5,880 $ 17,395 $ 14,151
Less:
Stock-based
compensation expense 584 631 806 2,237 1,851
-------- -------- --------- -------- --------
Non-GAAP general and
administrative expense $ 5,117 $ 4,638 $ 5,074 $ 15,158 $ 12,300
======== ======== ========= ======== ========
(as percent of total
revenue) 13% 13% 13% 13% 13%
BroadSoft, Inc.
Reconciliation of Non-GAAP Financial Measures (continued)
(Unaudited)
Three
Three Months Ended Months Nine Months Ended
September 30, Ended September 30,
June 30,
2012 2011 2012 2012 2011
--------- -------- --------- -------- --------
(In thousands, except per share data)
Non-GAAP net income and
income per share:
GAAP net income $ 3,140 $ 7,345 $ 2,356 $ 7,197 $ 26,831
Adjusted for:
Stock-based compensation
expense 3,326 1,890 3,781 10,298 4,893
Amortization of acquired
intangible assets 730 236 557 1,846 726
Non-cash interest expense
on our convertible notes 1,286 1,159 1,273 3,801 1,331
Non-cash tax provision
(benefit) 1,505 58 1,425 4,393 (10,082)
--------- -------- --------- -------- --------
Non-GAAP net income $ 9,987 $ 10,688 $ 9,392 $ 27,535 $ 23,699
========= ======== ========= ======== ========
GAAP net income per basic
common share $ 0.11 $ 0.27 $ 0.09 $ 0.26 $ 1.01
Adjusted for:
Stock-based compensation
expense 0.12 0.07 0.14 0.37 0.19
Amortization of acquired
intangible assets 0.03 0.01 0.02 0.07 0.03
Non-cash interest expense
on our convertible notes 0.05 0.04 0.04 0.14 0.05
Non-cash tax provision
(benefit) 0.05 - 0.05 0.16 (0.38)
--------- -------- --------- -------- --------
Non-GAAP net income per
basic common share $ 0.36 $ 0.39 $ 0.34 $ 1.00 $ 0.90
========= ======== ========= ======== ========
GAAP net income per diluted
common share $ 0.11 $ 0.26 $ 0.08 $ 0.25 $ 0.96
Adjusted for:
Stock-based compensation
expense 0.12 0.07 0.13 0.36 0.17
Amortization of acquired
intangible assets 0.03 0.01 0.02 0.07 0.03
Non-cash interest expense
on our convertible notes 0.04 0.04 0.05 0.13 0.05
Non-cash tax provision
(benefit) 0.05 - 0.05 0.16 (0.36)
--------- -------- --------- -------- --------
Non-GAAP net income per
diluted common share $ 0.35 $ 0.38 $ 0.33 $ 0.97 $ 0.85
========= ======== ========= ======== ========
Source:BroadSoft, Inc.
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